CL Financial bailout – Smashing the Code of Silence

I have been preparing my submissions for the Colman Commission and took some time-out to start reading the Report into the USA’s financial crisis. Of course I am referring to the Financial Crisis Inquiry Report, which was published at the end of last month, about a year after its first hearings.

Even though I have barely scratched the surface of this 662-page work, it has already been a deeply fascinating read, filled with cautionary insights. The first conclusion of that Report is worth citing –

“We conclude this financial crisis was avoidable.

The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble. While the business cycle cannot be repealed, a crisis of this magnitude need not have occurred. To paraphrase Shakespeare, the fault lies not in the stars, but in us.

Despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs. The tragedy was that they were ignored or discounted…”

It is an epic failure in that the world’s strongest and most diversified financial system was brought, literally, to its knees by a tidal wave of greed. Some of the main features were –

Slack regulators, who had looser and looser control of market activity, yet did little or nothing to propose the need for better controls.
Corrupt politicians, who accepted huge political donations from the financial institutions – yes, both parties – so that there was an absence of real debate on major policy shifts and consequences
A sheer overdose of hubris in an atmosphere in which it seemed, against all good sense, that tangible risk had been abolished. The catchphrase among market players was ‘IBGYBG – I be gone, you be gone’ – denoting a total abandonment of the notion of customer service. In many cases the salespersons knew what they were selling was of such poor quality that their own firms were betting against it.

If any of this sounds familiar, yes, you are right; it is almost the same as our own crisis. The old aphorism ‘When Uncle Sam catch a cold, the Caribbean get pneumonia’ comes to mind.

I have to say that the reading is a sobering experience as one starts to reflect that the deep and broad USA economy has been crippled by these ‘smartmen’ and their political minions. So what hope do we have of resisting those elements? That is the question we need to grapple with in this rounds.

But for all the parallels, there are two important differences –

Firstly, the guilty actors are not going to own-up. This is one pie they won’t want a piece of. They may try to seek exoneration in a version of the truth which locates blame somewhere on Wall Street. Those assertions need to be strongly challenged; they represent a piece of pure mischief.
Secondly, the US crisis is far smaller, proportionally, than our own. The Minister of Finance stated in the 2011 Budget (pg. 8) that the CL Financial bailout was costing our country more than 10% of its Gross Domestic Product (GDP). In comparison, the US bailout was estimated, in December 2010, by their Treasury Secretary to be costing about 1% of that country’s GDP. These facts show the double-mischief of these bold-faced people trying to tell us that this is just like in America.

According to those sources, this crisis is costing us 10 times more than the Wall Street one we keep on about. The relevant Ministry of Finance Press Release of 17th January 2011 states, “…With the Government’s planned bailout of CLFG (CL Financial Group), Standard and Poor’s expect net general government debt will rise to 28% of GDP in fiscal 2011 from 15% in fiscal 2010, though it will remain below the 36% median for ‘A’ rated sovereigns…” That is a difference of 13%. Yes, that is 13 times more than the USA…

This crisis will require us to properly compare and contrast those situations.

It has been two years, but at last the Commission of Enquiry into the T&T financial collapse is about to start its hearings. For the first time and against all their schemes and plans, the main agents of the Code of Silence are going to be forced into the direct sunlight to face questions and of course I mean the several court cases and the Colman Commission as discussed in ‘Testing the Code of Silence‘.

The final date for submissions to the Colman Commission is Monday 14th February, which means that all written evidence must be filed by then. I am not sure if electronic evidence, like the 55-minute interview Brian Branker (former Executive Chairman of British American Insurance Co.) gave on Up Next! in September 2010 is allowable, but it seems worth it to try. So this is my call for the producer of that show, Jerry George, to please do submit it. If you are interested, it is at http://vimeo.com/15145888.

I expect that by now the main actors in this Code of Silence are all rehearsing their lines and agreeing who will speak on which piece and in fact which parts to be silent on. In my opinion we can expect nothing but self-serving and defensive statements, if not outright lies, from the main actors in this mess – the CL Financial chiefs, the wayward Regulators and of course, the auditors. The burning question is therefore how is the public interest going to be defended and advanced? By whom? On what terms?

To make the obvious comparison with the Uff Enquiry, we are looking at the same kind of procedure. The decisive difference is that, in this case, the balance of forces is entirely different.

You see, in the Uff Enquiry there were the forces of the State and its agents all lined up to defend their way of operating – that included UDeCOTT, Calder Hart, National Insurance Property Development Company (NIPDEC), Housing Development Corporation (HDC) and of course the State itself was in the Enquiry in the person of the Attorney General. On the other side there were the Joint Consultative Council and Dr. Keith Rowley, MP. All those parties were strongly represented. There were also independent forces at the Enquiry – the Trinidad & Tobago Transparency Institute (TTTI), Carl Khan and myself – the only two witnesses whose testimony stood without hostile cross-examination.

Due to the balance of forces in that forum, the Uff Enquiry was satisfactory in that all versions were strongly contested under cross-examination and also by conflicting testimonies – the Enquiry was forced to decide on the veracity and relevance of evidence…there was no easy middle road or settling for a version because no one had spoken against it.

Here, in the Colman Commission, we face an entirely different order of challenge. Let me explain –

Firstly, the quantities of money involved are several times larger – at least ten times more, in my estimation.
Secondly, the entire establishment seems to have capitulated to the ‘Duprey Dream’. That is a state in which no serious questioning of the actions of the CL Financial chiefs is undertaken. In the USA experience, this phenomenon is described as Regulatory Capture. It is one in which regulators are actually ‘occupied’ by forces who are the people they are supposed to police. That is not unfamiliar to us here in Trinidad & Tobago, but that is why we must fight against it. It is a true nadir of absolute corruption. A roaring silence of the formal and informal regulators.
Finally, based on that record, the Colman Commission will be dominated by these people, the ones who caused the entire mess. If that is the case, there is a real danger that the truth could be compromised or even sacrificed. That peril is what we have to work against.

Some of us have insisted on this Enquiry as a necessary step in preventing a repetition and further looting of the society. The facts and the versions of the facts are about to be tested in the crucible of the Colman Commission.

The only way we can avoid the US fate, and possibly worse, is by doing our very best to learn from the bitter experience. Those of us, who have insisted on this crisis being a real turning-point, must make the most of this moment. In my opinion, that can take place on two levels –

The publicity level, with lobbying to ensure that the process receives the maximum possible exposure, generally, and spot-lobbying to ensure that the key players in the mess are spotlighted when it is their turn to testify. The sole Commissioner was reported to have said that the hearings will be televised. How can we check on and ensure that takes place? Also, we should be insisting on a similar arrangement to Uff with the transcripts being on-line.
The evidential level, at which we need to make submissions to contend with the rotten and dishonest discourse from the utterly unresponsible parties who are ultimately responsible. We not only have to contend with and destroy the ‘Anansi-stories‘, we also have to advance our own arguments into the spaces and places they do not want us to go into.

The key person from whom I would like to see a submission is the respected former MP and economist Trevor Sudama, who was the first person to put onto the public record these serious concerns over the health of the CL Financial group. That was in the 2001 Budget debate and of course we all know that Sudama and his colleagues – Ramesh Lawrence Maharaj and Ralph Maraj – were strongly attacked, ostracized and ultimately forced from the political Head Table. All by their own party colleagues.

Mr. Sudama, we need your input in this vital matter. The background for your intervention in this matter, your debate on it and the political attack must form part of the record in this Enquiry.

Some of the key commentators who should put in written submissions are Camini Marajh of the Express, Andre Bagoo of Newsday and Anthony Wilson, the Ag Editor-in-Chief of this newspaper.

Our professional Institutions have been pointedly silent and I would hope to see submissions from –

Institute of Chartered Accountants of Trinidad & Tobago – To be fair, the ICATT President, Anthony Pierre, joined me as a guest to discuss this crisis on Sunday Morning Politics on 26th September 2010 .
The Law Association
Bankers’ Association of Trinidad & Tobago
Association of Trinidad & Tobago Insurance Companies,

Our institutions of higher education should join in with their perspectives –

Arthur Lok Jack School of Business, part of UWI
School of Business and Computer Studies
School of Accounting and Management
Caribbean Centre for Monetary Studies, also a part of UWI
UWI’s Economics Department
UWI’s Government Faculty

I am going to close by sketching just one parallel.

To go back to the main points of the Wall Street experience as outlined above, we hear of these complex debt swap instruments and their toxic consequences. The fatal flaw of these instruments, according to the reports I have read, seems to be that they seemed to be a good way to invest with high returns and little or no risk. The truth turned out to be just the opposite.

It all seems remote from our own situation, but that is not the only way to look at it. The most controversial single item in this entire situation here has been the EFPA, an annuity duly approved by the Supervisor of Insurance. When we consider the promotional literature for that product, it is nothing less than scandalous that a leading company should have been allowed to advertise an investment product with exceptional rates of return and the repeated phrase ‘guaranteed investment’. There is absolutely no such thing as a guaranteed investment. It is a complete contradiction in terms, but yet it went out to tens of thousands of people, who suspended their disbelief and went along for the ride. That is the Trini parallel with those complex debt swap instruments.

You see?

Some considerations on Property Tax

At this point in time, the nation’s budget is running at a deficit for the third successive year and the Minister of Finance is tasked with developing new sources of revenue. I think it is time to return to the question of property tax.

According to a recent statement by the Minister, if all the taxes due were paid, we would not have any budget deficit. The ‘tax gap’ is the difference between the total taxes owed and the actual taxes collected. While the notion of total compliance by taxpayers would be somewhat unrealistic, the goal of closing the ‘tax gap‘ is certainly one worth pursuing.

As I wrote on 19^th September in this space –

…consider that rental income is also subject to income tax. Not many people who own rental property actually pay income tax on that rental income – if you don’t believe me, just ask a few friends or relatives who own rental property. This seems to me to be an area in which the Finance Minister can easily collect the data and increase the State’s revenue by staying within the ‘No New Taxes’ promise and implementing the laws which are already on the books…”

I am returning to the subject in this article.

When one considers how wealth accrues in our society, it is obvious that property forms a significant part of the nation’s assets. A great portion of the wealth of our successful citizens flows from rentals, buying blocks of land to sub-divide and sell-off lots, development or just flipping (buy low, sell high). There is no doubting that property dealings are a significant wealth-creating engine in our society.

The property sector is lightly taxed, with no real capital gains taxes, very little income tax collected on rentals and very low rates paid for Lands & Buildings Taxes/House Rates. Only in the case of Stamp Duty is there a somewhat modern system in place, but even that has been effectively neutralized by the real traders.

The widespread and varied protests against the PNM’s Property Tax proposals seemed to me to be divided into two types.

Firstly, the general mood of protest against paying any further monies to a wasteful and corrupt government.
Secondly, we were fed the notion of inequity, with many examples about pensioners and the less well-off families being heavily promoted.

In saying so, it is striking to me that the position of the serious property dealers remained concealed in that campaign, which was effective in seeking after sympathy-support. Almost reminds me of the Clico Policyholders Group.

The first class of objection is practically dead, given the strong mandate given to the PP in the General Election. That said, it would be literally playing with fire for them, having achieved office by campaigning against the PNM proposals, to bring forward a new property tax in a similar mode.

The second class of objection is interesting in that it could be instantly invoked to play on our natural sympathy for the ‘underdog’.

I am proposing that the Minister of Finance consider targeting rental income for taxation.

So, what are the merits of this proposal?

Firstly, the information could be easily gathered in the upcoming national census, for which enumerators have already been trained. All that is required is three simple questions –
1. Do you rent your home/business? – Yes or No? If the answer is no, the other questions are omitted. If the answer is yes, the next two questions apply.
2. Who is your landlord?/To whom do you pay rent?
3. How much rent do you pay?
Given the natural tension between landlords and tenants, it is difficult to imagine many tenants concealing or distorting facts for the benefit of their landlords. The simple fact is that there is plenty of information just waiting to be collected.
Secondly, the legislation is already in place, so there is no need to get any law changed or go to Parliament for any discussion. I am proposing purely administrative measures, in which our existing laws would be properly enforced, something the public is continually calling out for.
Thirdly, owner-occupiers will be lightly taxed under the present arrangements, while only the landlords will pay income tax on their rental income. That will negate the sympathy-objection, as outlined above.

In terms of actual implementation, it would be advisable to get a high rate of participation by offering a tax amnesty to those who filed corrected tax returns within say 3 months. The waiver of penalties and interest charges on the 6-year tail of liability would be an attractive incentive to sensible investors.

Just to be clear, the payment of income tax on rental income does not set-off or reduce a property owners’ liability to pay property tax, as in the case of Land & Buildings Taxes or House Rates.

There is a substantial pool of untaxed income, together with an inescapable means of gathering the necessary information.

The only question is ‘What are we waiting for?’

SIDEBAR –Property Tax Act 2009 – an update

The closing act of the last PNM regime was the vastly-unpopular property tax, which was assented-to by our President on 29^th December 2009, after bruising months of public protest and many, many uninformed statements. The Property Tax Act 2009 was to be the basis of a complete revision of our country’s property tax system, insofar as the old Land & Building Taxes and House Rates were concerned.

The nationwide protest against the Property Tax proposals was a key factor in coalescing the opposition to the PNM and seemed to me to have paved the way to the electoral victory of the People’s Partnership government in May 2010. One of the PP’s most distinctive and popular manifesto promises was the repeal of that Property Tax Act.

I was in support of the proposed changes to the Property Tax system as being long-overdue.

As things stand, no Property Taxes have been paid for 2010 and the Minister of Finance has given property-owners a waiver for this year. That waiver amounted to over $140M and it remains unexplained.

There have recently been advertisements seeking details from property owners to update the database for Lands & Buildings Taxes, so it seems that some further revisions are to take place.

CL Financial bailout – Amazing scenes

Winston Dookeran vs Peter Permell. Original photo courtesy Trinidad Guardian. Illustration by NiCam Graphics The new situation is charged with peril and one is reminded of Naipaul’s father, the intrepid journalist from A House for Mr. Biswas whose favourite tagline was “…amazing scenes were witnessed…”

Finance Minister, Winston Dookeran, addressed Parliament on the Finance Bill (No. 2) 2010 on Wednesday 24th November. It was a lengthy and detailed statement, which put things into a necessary perspective. For me, it was important that Dookeran gave priority to the claims of the contractors and of course, the last item being the claims being made by the various groups representing Clico policyholders.

The Finance Minister held his position as set out in the 2011 budget, which was no surprise when one considers his statement that the various submissions received from the policyholders’ groups did not withstand scrutiny. I only had two significant concerns in terms of outstanding items which require proper attention.

The first of those was the continuing failure to produce the audited accounts for the CL Financial group – by now the 2008 and 2009 accounts are long overdue. The absence of those important figures means that the many heated discussions taking place, in the media and privately, are all uninformed. The questions are simple – Are the 2008 and 2009 audits for the CL Financial group completed or not? Yes or no? If they are, when are they to be published? If not, what is the problem with completing these?After all, as I wrote about the 12th June 2009 CL Financial Shareholders’ Agreement in this space on 1st April 2010 –

…Clauses 2.3.3 and 2.3.4. of the SA, require the outgoing CL Financial chiefs to render all assistance to the incoming Board and Management in terms of all records and accounts etc. The question here is ‘Have the new Board and management been receiving the full assistance of the previous CLF chiefs?’ If not, what is being done about it?…
The second concern I had was with the special window being opened to assist the Credit Unions, some of whom had invested in excess of 10% of their funds in the EFPA, an annuity approved for individual investors. We need to know just which Credit Unions took those imprudent investment decisions. There is no way we can merely legislate or pay our way out of this crisis, the problem runs deeper, into fundamental matters such as the attitudes of the leadership group in the society. Some of those details might emerge during the upcoming Commission of Enquiry, but it would be to Dookeran’s credit if he released the names of those Credit Unions and the amounts to be refunded.

The immediate statements of the Clico Policyholders’ Group (CPG), which targeted Dookeran, are a perturbing sign. For whatever reason, the CPG is ignoring the settled principle of Cabinet’s collective responsibility. That stance seems to be detrimental to effective negotiation and I am beginning to wonder if some person or persons in the Cabinet is ‘giving them basket’.

The threatening statements from the CPG as to the damage their proposed lawsuit can do to our country’s economy are nothing less than scandalous. We are now witness to a grim game of brinksmanship.

We have all heard the arguments and rumours surrounding this bailout, so no point repeating those. It certainly seems that those are going to be ventilated in a high-profile series of lawsuits. I only hope that the hearings remain open and do not take place in a sealed Court. That is what happened in the very first lawsuit after the bailout, in which the Central Bank was attempting to get CL Financial to comply with the terms of the bailout. The stakes are too high now for any concept of privacy to prevail in this matter.

The Minister of Finance also announced that the conditions under which the financial relief would be offered were being considered and it is good to know that there is to be no unconditional relief at our collective expense.

My thoughts on that aspect are that the State must conduct itself in an exemplary fashion and not be placed at any further disadvantage, having already shouldered this enormous, exceptional payout.

There are now anti money-laundering (AML) laws which require depositors to make declarations as to the Source of Funds, all in an effort to prevent the proceeds of crime from entering the legitimate economy. In my view it is necessary for the government to be satisfied that the various sums being claimed by these policyholders were properly declared under the AML laws. We have had shocking reports about the elementary management controls which were either absent or awry in the CL Financial group, so it would not surprise me if their AML-compliance was lax. That needs to be thoroughly checked. It would not be acceptable for our taxpayers’ monies to be used to rinse ‘dirty money’.

Also, the claimants who owe on their taxes – VAT, PAYE, Corporation Tax, Income Tax and so on – should not be refunded. As Dookeran said in that address, if everyone paid the taxes due, our budget would not be in deficit. We cannot go deeper into deficit without these elementary precautions being taken.

Finally, there is the issue of the many borrowers from Clico, British-American, Clico Investment Bank (CIB). In the case of CIB alone, we are told that about $1.0Bn of those loans are ‘non-performing’ – which means that the borrowers are not repaying their loans. It would be perverse for some of those non-performing borrowers to receive refunds from the State. This is a live part of this situation, since in the case of CIB itself, the very Inspector of Financial Institutions swore in his affidavit filed in the winding-up action for that failed bank –

…With respect to the Creditors of the Petitioner, the Petitioner has met the statutory obligations for the Board of Inland Revenue (except for Corporation Tax Returns for 2007, 2008 and 2009 which are being prepared and remain outstanding)…

That is a glaring example of the kind of wanton wrongdoing at the heart of this mess. CIB fails to file its Corporation Tax returns for three years, yet keep their banking licence and arrange for the taxpayer to bail them out when it all goes sour.

Some claimants may try to invoke the ‘corporate veil’ to shield themselves from various breaches committed by their companies, but this is an exceptional situation in which the State is making an offer. In my view, the corporate veil ought properly to be ignored, so that the long-standing commercial principle of ‘set-off’ can be applied to the claimants.

The Colman Commission of Enquiry and its effects on the Code of Silence will be my next topic.

CL Financial bailout: A Season of Unreason

We are now entering a bizarre endgame in this rounds of musical chairs. The children’s game has returned for us adults, but with a vengeance.

As I wrote on 10th September in this space, the real question is ‘When exactly did the CL Financial group collapse?’.

To understand this huge matter we need to put things in the correct order –

Firstly, the CL Financial chiefs left others holding the risks. Some dates and names, to support the theory –
- L.A. Monteil – retired at the end of March 2008
- M.A. Fifi – retired in August 2008
- Robert Mayers – retired in December 2008.
What did they know and when did they know it?
Secondly, there was a series of large-scale, rapid withdrawals of funds which preceded the start of the bailout. That pattern of activity would have speeded-up the collapse. It would be very interesting to see details of who broke their deposits and failed to ‘roll-over’ in that crucial final stage.
Thirdly, post-January 2009, we have the massive payout of State funds, as detailed in the Guardian editorial of 25th October. Who was the recipient of those funds? Who benefited? On 1st October, the Prime Minister promised to publish that list and we await with interest.
Now, with the PP government taking the decision to review the bailout process, we have entered a truly bizarre stage of this matter. This is the part where all those trusting people who were told to wait and have faith, are realizing that the people in the know have already withdrawn and secured themselves. Some of those people in the know were the same ones who were telling the faithful to keep on waiting. What a thing.

There now appear to be at least four groups representing these investors –

The Clico Policyholders’ Group (CPG) – which is the most visible one with Peter Permell, Manny Lawrence and Norris Gomez etc.
The Clico Policyholders’ Protection Association (CPPA), which is the one with Harold Sookhan and Ramesh Lawrence Maharaj.
South Action Group – with Solomon Hem Lee
Denbow Group – a small number of Clico investors who are being represented by Dr. Claude Denbow SC.

Some of the positions being taken by the various groups are indicative of the degree of desperation of the parties, hence the title of this article. The general view emerging from these groups seems to be that the CL Financial group is basically healthy and profitable, so there should be no issue about returning their investment.

I do not know what those views are based on and it is impractical to continue basing our discussions on the series of rumours and draft reports and suchlike. We need good quality information to make a quality decision and that is not negotiable. We need to insist on that as a minimum.

After the first round of organizing and attorneys’ letters, followed by the Prime Minister’s important address on 1st October, we are now into what appears to be an even stranger place.

Two of the stranger proposals emerging from the CPG’s Port-of-Spain meeting on 24th October were –

Prem Beharry of the CPG was reported in the Trinidad Guardian to have said – “…Ryan ALM are saying they would take US$600 million and would convert it to the best debt instrument in the world which is US Treasury Bills,” Beharry said.
“The Ryan ALM group is saying, within three months if they are engaged, they would be able to sell those bonds and get in cash of US$1.8 billion which is equal to the debt of TT$10.5 billion—that money would be used to pay all the policyholders…” That is literally too good to be true. It is the same approach that created this mess in the first place – both at the CL Financial group and Hindu Credit Union. It seemed to me that the CPG was recommending that the government put $600M USD of our taxpayers’ money into this scheme. Yes, I said scheme. Maybe if it was really so good they should have just accepted the discounted rates being offered in the budget and invested those funds with Ryan ALM. After one time is really two times, yes. I recently read that one Prem Beharry was appointed to the National Gas Company Board.
Another proposal, this one reportedly stated by Peter Permell, the CPG’s most prominent spokesperson was for the state to pay 40% immediately with the balance being payable in 5 to 7 years. The persons waiting for delayed payments would earn interest of 4-4.5% on those unpaid balances and also be entitled to a 51% share of any uplift in the value of sold assets. No, there was no proposal for those CPG members to share in any losses if assets had declined in value.

It may all just be a series of negotiating positions, but it seems pretty clear that no one from these various investors’ groups intends to take a discount or ‘haircut’ on the monies owed to them. The unstated assumption is that if someone has to stand the bounce or take a haircut, that someone must be the taxpayer. That could never be the correct position. So, we need the facts.

The most startling development is the Central Bank’s full page adverts on Thursday 28th October, repudiating the claims that it had offered any guarantees in this situation. The reaction was immediate, with the CPPA publishing large adverts in opposition the next day and a new anti-bailout group emerging for the first time – at last! The CPG’s response was a nadir in their campaign, with the Trinidad Guardian reporting that – “…Permell went on to say that they do not care where the Central Bank gets the money from once they guarantee the policyholders’ contracts…” – I could scarcely believe what was on the page before me. Even the most militant Trade Unionists use more reasonable language.

Which brings us right to the meat of the matter, the order of things. What is the reason that the investors’ groups are now at the front of the line for assistance from this government? I could be wrong, but it is easy to get that impression when one hears of Cabinet discussing the matter twice in one week, certain groups giving threatening timetables and so on. I do not know if our Cabinet – PNM, UNC or PP – has ever given such a total priority to any matter in the past.

There are other claims on the limited monies available to the State. All of those claims existed before these investors groups. All.

Many people have poor water supply. Outstanding payments to contractors and suppliers are in excess of $7.0Bn, according to Central Bank estimates. Insufficient money for OPVs – the estimated cost of $3.0Bn is too much for the country to bear, so national security is falling behind. More guns and drugs entering our homeland. Public Servants claims are about $3Bn and that is also a strain on the Treasury. Not enough police cars. Sad situation in the public hospitals.

The CPG issued a 2 page advert in the Guardian on Thursday 4th November and it deserves careful reading. It was good to see their call for the publication of the correct financial information before making a decision. They set out their proposals for the relief of CPG members – those are the latter of the two above, with the added condition that they be given two seats on the boards of CL Financial and Clico.

The CPG claims that its proposals place no additional burden on the taxpayers, which is a good thing, if that is truly so. The CPG’s proposals are silent as to how the monies already spent are to be recovered.

The real test will be if the accounts and asset valuations reveal the group to be insolvent. Will the various investors’ groups accept that or are we in for a long, bitter fight?

SIDEBAR: The Commission of Enquiry

The Attorney General recently announced that he had withdrawn Sir Gavin Lightman QC as the sole Commissioner, due to an apparent conflict of interest. Lightman had appeared for Clico in a 1991 court case and the PNM did well to have stopped this before it went too far.

Two important further points, though –

Firstly, this is the second such occasion. In the first case, the Commission of Enquiry into 1990 was announced with retired Appeal Court Judge Mustapha Ibrahim as its chair, until he pointed out that he too had a conflict of interest. There needs to be some more care taken on this count.
Secondly, the terms of reference need to be qualified, since the AG was reported to have said that “…The COI, he said, covers CL Financial, Colonial Life Insurance Company (Clico), Clico Investment Bank, British American Insurance Company and the HCU…” Having been frustrated in my efforts for the past fortnight to get confirmation of the Terms of Reference from the AG’s Ministry, I am forced to rely on press reports. Question being, why is CMMB being omitted?

CL Financial bailout: These Turbid Times

Last week I wrote about the Code of Silence observed by our ruling class. I gave examples to support my idea, but there was not enough space to mention everyone.

The Bankers Association of Trinidad & Tobago (BATT) and the Association of Trinidad & Tobago Insurance Companies (ATTIC) are also part of the situation.

We have a long history of our rulers making huge, stupid, destructive decisions without any commitment to transparency or accountability. That lack of transparency is what allows corrupt to flourish. We can never eliminate corruption, but if we are serious about reducing it, we need to proceed differently.

Maybe, just maybe, this is the kind of colossal event which could force some of us to drastically change our ways, despite the positions we now assume. This is a moment of national peril and the continued observance of the Code of Silence is going to cost our country plenty money.

As it is, we already have been bound to a rotten bailout of the wealthiest individual in the Caribbean by our Treasury at ZERO interest. Anybody looking to set up a small business has to face the bank and pay interest. None of that for Lawrence Duprey and the CL Financial chiefs. They have been able to enrich themselves and when the entire thing went wrong, they were able to negotiate a handsome handshake for themselves and then leave the mess for our government to clean-up.

That is the plain meaning of the bailout. Is not policyholders we bailing-out, is the richest, smartest characters in the country. The bailout script is unfolding so well that almost the entire discussion is now about the fairness/unfairness of the government’s position with respect to retired policyholders etc.

Real Anansi antics.

The CLICO Policyholders Group (CPG)
Competing agendas? There was an EFPA group and a CLICO Policyholders group formed just after the budget on 8^th September, but they soon merged under the latter name. I am now seeing what appears to be a substantial split with 2 competing meetings being organised for 10am today – one in Port-of-Spain and the other in San Fernando.

The CPG group has been very successful at getting their views known and making the media circuit, with the eventual meetings with the advisory group set up by the PM.

The main concern being advanced by the CPG is for the recovery of the funds deposited with CLICO and there has been no reply whatsoever to the point that, despite its labelling, the EFPA was largely sold and understood as a deposit. The accounting rule of thumb as to ‘substance over form‘ in interpretation is an irrefutable part of the debate on this, but CPG have been silent on this point.

Almost all the many people with whom I have discussed this issue, have been very plain in their language – ‘I had my money deposit with CLICO‘ and so on. But the word Policyholder is more likely to attract sympathy, so the games continue.

We already spent $7.3Bn in cash since the bailout was announced. Please note that nobody is even talking about how the State is going to recover that loan. The only talk is about how are they, the depositors, going to recover their monies.

There is a real principle of financial equity being shredded to pieces in the conduct of this bailout and it was disappointing that Mr. Dookeran, as an Educator in the field, did not take the opportunity to expand on this.

The intent is plainly to deprive the Treasury of its limited funds so that the assets of 15,000 people can be preserved.

So, What about those negotiations?

When the Prime Minister spoke on 1st October, she created an advisory group (headed by Minister of Food Production, Vasant Bharath) to meet with the policyholders to seek other options.

The Prime Minister was to meet with concerned persons and activists on Wednesday 7th October in Chaguanas, but that meeting was cancelled at short notice, with no alternative dates given.

What we are left with is lengthy, secret meetings to discuss the review of the bailout terms, with no concrete information emerging. That secrecy is totally unsatisfactory. It smacks of secret deal-making and does nothing to inspire the confidence which is supposedly the very purpose of this exercise.

The last regime, with all of their noble intentions and devout Ministers, lost their way in a morass of muddled purposes, secret deals, mixed-up with misleading and false public statements from the highest office in the land. We all know how that ended. The question is whether we have learned anything from that bitter experience. The Peoples’ Partnership were the main beneficiaries of those PNM errors, have they learned from that?

Our money is being spent on this massive exercise and it is not good enough to emerge from these closed meetings with agreed phrases like ‘constructive or meaningful’. This emerging pattern speaks of disrespect for the acumen of our people.

To re-state my equation:

Expenditure of Public Money – Accountability and Transparency = CORRUPTION

Imagine these bold-faced people declaring that when they are done and settled, the terms will be announced to us who paying for the whole thing. The first sign of a bad marriage is when the husband is the last to know – some say, the wife. But the main point is that the public cannot be the last to know.

The simple and painful fact is that public confidence in our leaders is at an all-time low. The time-honoured notion that a leader is someone wiser, more mature, less reckless and of overall higher ideals has been tested to destruction by events. In this particular case, it is easy to understand the charged atmosphere, hence the need for extra ventilation and transparency.

I was recently emailed by a well-meaning group asking that I start setting out some ideas of how CLICO might be rescued and I had to remind them that without basic information, all we can do is argue emptily with each other. All to the amusement of the masterminds of this, the greatest economic crime in our nation’s history.

I was even ‘phoned, while writing this, by an acquaintance who is a leading member of the CPG to join him and an un-named UK guest in a TV studio on Monday morning to discuss all this. Yes, I dismissed the request – too much secret-thing for my taste – and challenged the caller to name the person, supposedly a top UK expert.

What would be ‘constructive and meaningful’ would be to publish these long-outstanding reports so that we in the public can inform ourselves on the vital issues –

The original Duprey letter of 13th January 2009.
The audited accounts of the CL Financial group for the years ending 31^st December 2008 and 2009 – Have PwC completed that? When are they to be published?
The Mottley Report – There was a team of three advisers – Wendell Mottley, Colin Soo Ping Chow and Steve Bideshi – appointed to examine the CL Financial group and we need to know what were the findings of this group.
Given that we are being asked to bailout and clean-up Mr. Duprey’s crisis, I feel we need to be told the names and details of those who benefitted from the $7.3Bn paid out so far, as well as those details for the borrowers of the $1.0Bn of ‘non-performing loans’ in CIB’s portfolio.
Finally, we also need to have the position of the CLICO Policyholders’ Group published. What exactly are they claiming?

We have seen reports in the press about the very long Cabinet meeting on Thursday 21st at which the CLICO issue was said to be part of that agenda.

It would be totally unacceptable for a deal to be sealed without properly informing us, the taxpaying public, as to the true background.

The People’s Partnership has already distinguished itself, positively, by announcing Commissions of Enquiry into the attempted coup in 1990 and the Financial collapse (CL Financial and HCU). This is no time to get diverted into back-room deals.

I am working for betterment and from you, our elected rulers, I expect better.